Fighting the Equifax Credit Breach

While our eyes were trained on a catastrophic hurricane in the Caribbean, a proverbial storm in the form of the Equifax credit breach was impacting the lives of most adult Americans regardless of where they live. It’s probable that your personal data has been compromised. By Equifax’s count, 143 million Americans had their credit file data stolen.

This hack is the terrible one we have been dreading in terms of its scale and the data exposed. Your Social Security number, date of birth, current and previous addresses, driver’s license and credit card numbers may be in the hands of criminals. With this information, they could apply for new credit cards, file a false tax return with the IRS to collect your refund, and try to take over your bank and other accounts.

Equifax’s response to this hack will be in business school casebooks for a generation for its ineptitude. Its initial offer was a credit monitoring service that was free for a year. The implication was that if we wanted this service for longer, we would have to pay to protect ourselves against Equifax’s own negligence.

When free monitoring was initially offered, there were reports that you were forced to waive your rights to seek damages against Equifax to qualify for this service. After public outcry, Equifax has revised this stance so you preserve your rights even while accepting the credit monitoring.

My recommendation is that you don’t play Equifax’s game at all. Don’t use their credit monitoring service or check their website to see if you have been hacked. Instead you should assume your personal information has been released. Instead, follow these steps to protect your credit.

Set up credit monitoring from another source. If you want to stay on top of your credit inquiries and scores, I recommend the free Credit Karma monitoring service. They keep tabs on your credit in return for the opportunity to suggest credit cards and other products. This is a fair trade in my book, and so far they have been a good safeguard of personal information. This must be done before freezing your credit.

Set up credit freezes with all three bureaus. The three credit reporting agencies of Equifax, Experian, and TransUnion all enable you to freeze your credit online by spending about 15 minutes on their websites. The credit freeze service is free to all Coloradans with all three credit bureaus.

When you freeze your credit, you make it impossible for someone to take out credit in your name in spite of having all of your personal identifying information as long as they don’t have the password or PIN specific to the credit bureau. When you freeze your credit, you’ll be assigned a password that is needed to “thaw” your credit. Don’t lose your password as it can take days to thaw your credit without them.

Freezing your credit doesn’t lower your credit score or affect your existing credit lines including mortgages, credit cards, and car loans. If you need to apply for credit because you’re changing mobile phone providers or refinancing your mortgage, you’ll have to temporarily thaw your credit freeze at a cost of $10 in Colorado per credit bureau. With the exception of mortgages, most companies just check with one credit bureau so over time it should cost far less than traditional, less effective fraud protection services.

Reduce possibility of tax refund theft. In recent years there has been an uptick in the number of tax returns being filed with stolen Social Security numbers, resulting in stolen tax refunds. The IRS has taken steps to prevent fraud through requiring the AGI from the last year’s return or in some cases a special IRS PIN. Perhaps the best protection against identify theft is to manage your tax withholding and estimated tax payments so you don’t receive a large tax refund. After all, if you end up owing the IRS money, then the fraudsters won’t be able to abscond with your (nonexistent) refund.

Reach out to your state and federal legislators. By making 143 million Americans vulnerable to identity theft, Equifax should make credit freezes and thaws available to us for free forever – not just for a year. This release of our personal data will affect us for years to come. We should have a free remedy to protect ourselves. My hope is that Colorado legislators when they convene next year will pass legislation mandating that all credit bureaus make credit freezes and thaws free for all of us. There are hearings in the U.S. Congress to address this issue as well.

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